In an account takeover, an individual or well-organized cartel obtains access to a consumer’s account, changes login credentials or personal data, then makes unauthorized transactions using that account. Unauthorized purchases, transfers of funds, and cancellation of payments can quickly lead to financial ruin for the consumer and reputational damage for the business that failed to prevent it.

The ease of committing fraud using online resources has made banking fraud detection necessary for loan origination.

Loan applications are often sent to multiple lenders simultaneously. The action is called loan stacking, and it can help address a legitimate need for quick funding, or to perpetrate a scam that brings quick funding with no intent of complete repayment.

One recent lending fraud analysis estimated that one in 123 mortgage applications, or 0.81% of all applications, contained indications of fraud during Q2 2019, compared with one in 109, or 0.91% in Q2 2018.

Phantom auto loans are a sophisticated scheme to defraud banks, credit unions, and fincos. No car is ever sold. Often, no actual dealership is involved. Fraudsters have cooperated to fabricate seemingly legitimate auto loans that have already robbed lenders of many millions of dollars.

What are the straw buyer red flags that lenders can use to identify fraud and prevent it from hurting portfolio performance? Any one or more of these characteristics are often the most obvious indicators of straw buyer fraud.

Down Payment Fraud Detection Key Points:

1) Loan fraud is on the rise with false identities as a leading scheme
2) Substantial down payments help disguise a fraudulent loan application
3) Lenders need to employ fraud analytics to identify and decline fraudulent loan applications